Shared ownership trapped

sneakygloworm

Hi all,

Not sure if anyone can give any advice but my situation is this:-

I'm 53 in a lower average paying job. Around 12 years ago, I purchased a 35% share on a property that, at the time, was on the market for 141k. The mortgage plus rent was around 550 per month and with all the bills paid, I was paying just over half of what I earned. Since then, I've married and had 2 children. The house value has apparently almost doubled so I cannot (and never could) staircase. My wage is basically the same but the rent is now over £430 per month (it's just seen a 10% hike this year alone). My father died 2 years ago and left a very old property with debt attached but also with huge maintenance needed so almost all of my savings has been sunk into that to try and prep it to sell but It could be years before it's ready as it's still in a pitiful state. 

With the rent rising as fast as it is, I've realized that by the time I retire, I'll be paying more than I did to begin with even with no mortgage. I feel awful and cannot sleep. I feel I have betrayed my wife and children as, if I die for instance, she's left with this huge burden or during retirement, i'll simply be spending retirement money on spiraling rent. It's not exactly what I envisioned going in and has turned into a literal nightmare over night. 

The obvious thing to do is to try to sell it with the monumental rent attached which I just feel no one will want to touch. And even if it does sell, I'm now too old to get back on the property ladder as no mortgage company will lend at my age. 

Does anyone have any advice at all?

theoretica

Have you talked to estate agents about selling your father's property?  It can often be better to sell as is, than throw money at something in the hopes of a higher sale price in the future.

RHemmings

Just one minor point - mortgage companies will lend at your age. As a general concept. I'm not saying that solves your problems which are clearly complicated and difficult and there are unknowns - e.g. can you sell your shared ownership property? 

If I was in your position I would be tempted to sell the parent's inherited property at auction, without spending any more savings on it. Then, use the sale price of that property after debts cleared to try and staircase your current shared ownership property to gain more ownership and reduce rent. That depends on the amount of equity in the inherited property - which you haven't told us. 

But, I'm just a random person on the internet - not a financial advisor with a specialism in managing inheritances and property. 

sammyjammy

Stop throwing money into the inherited property and get it sold.

ThisIsWeird

sneakygloworm said:

Hi all,

Not sure if anyone can give any advice but my situation is this:-

I'm 53 in a lower average paying job. Around 12 years ago, I purchased a 35% share on a property that, at the time, was on the market for 141k. The mortgage plus rent was around 550 per month and with all the bills paid, I was paying just over half of what I earned. Since then, I've married and had 2 children. The house value has apparently almost doubled so I cannot (and never could) staircase. My wage is basically the same but the rent is now over £430 per month (it's just seen a 10% hike this year alone). My father died 2 years ago and left a very old property with debt attached but also with huge maintenance needed so almost all of my savings has been sunk into that to try and prep it to sell but It could be years before it's ready as it's still in a pitiful state. 

With the rent rising as fast as it is, I've realized that by the time I retire, I'll be paying more than I did to begin with even with no mortgage. I feel awful and cannot sleep. I feel I have betrayed my wife and children as, if I die for instance, she's left with this huge burden or during retirement, i'll simply be spending retirement money on spiraling rent. It's not exactly what I envisioned going in and has turned into a literal nightmare over night. 

The obvious thing to do is to try to sell it with the monumental rent attached which I just feel no one will want to touch. And even if it does sell, I'm now too old to get back on the property ladder as no mortgage company will lend at my age. 

Does anyone have any advice at all?

Hi SG.

I don't really understand shared-ownership housing, but it's clearly designed to allow folk to 'buy' a property they wouldn't be able to manage on their own. Doesn't that remain the case? Isn't your property still desirable to others under that same scheme? Can't your 35% share be sold, giving you whatever the market increase has been - seemingly around double?

Everyone's rents have gone up, and everyone who is renting is struggling more than they were. So, even tho' your rent feels high to you, isn't it still 'normal' for that market, so that your 35% property is still as desirable as it was? So, if you were to sell, wouldn't you get your 35% back, plus the market increase since you bought it?

And then you have this second house... Ok, it's in poor repair, and there are debts attached to it. But, it'll still provide a 'sum'.

So, what is it you'd rather do? Sell your dad's house and have a few £k in the bank, or sell your current property and use this to do up your dad's house to live in?

Who is doing up your dad's house - are you DIYing this, or using builders? If the latter, then I think I'd suggest you stop, and sell it as it is. I think it's unlikely that you will recoup this renovating outlay. Houses that need work are pretty desirable, maybe more so in the current over-inflated market. It allows DIYers to buy a property cheaply, that they can do up in their own time and to their own spec and design, perhaps adding extensions and suchlike. It allows builders to pick up a 'project' that they can send their lads on to when there are gaps in their other jobs. Or, you can spend a large amount to have it done up for you, and then sell it. But you'd better do your sums - the renovated house had better return a darned sight more than the current value of the house + what you will end up paying to have it done up for you. If not, it'll be all that work, all your savings, and you'll be no better off!

Have you spoken to EAs about this house? Asked whether it's worth doing up first? Asked for 'current' and 'done-up' values - they should be able to answer all that with ease. If you haven't done so, then please do, as a priority.

It may feel like a hellish situation, and I'm not underplaying it at all, but it's what many many folk are feeling right now with the painful rent increases, and little chance to change that by buying a property due to the staggering price increases over the past decade. And, it's not your fault, just like it ain't for all those others stuck with renting. But, you do have a couple of big pluses here - you own over a third of one property, and all of another! Even with the caveats on both, you are surely in a much better position that the vast majority?!

Have you tried to work out the 'sums' involved in each scenario - selling one or other of the properties? Doing up dad's to sell or rent? Selling as is?

If not, make a cuppa and get out yer pencil...

Tucosalamanca

If you're worried about leaving your wife and children in difficulty, I'd say that life insurance is almost a necessity.
Enough to cover mortgage, funeral and legal costs at the minimum.
If possible, an extra £100k of cover would provide a lump sum that could be invested to broadly cover the the monthly rent payment (£100k @ 5% = £5kpa or rent covered).

Or, along with the suggestions above, would the proceeds from sale of the inherited property generate enough interest to at least partially offset the rent payments?

sneakygloworm

Dear All, Thank you very much for replying! I very much appreciate it. Now for some clarity. I wrote the first post in a bit of a rush this morning so i'll add some detail that I apologise for missing initially.

My Dad's estate was left pretty much without a will and as he'd re-married the house was left to us four "kids". Me, my brother and our two stepsisters (one of which was made executor as her mum died a year after my Dad). Together, we will hopefully take a quarter share. But 3 or 4 things are causing problems.

1. My Dad and Stepmum owed Money. Not sure how much but the solicitor will not release the deeds until the debt is repaid. 
2. The house really is in a poor state and in it's current state would likely make 200K possibly. The repairs we have taken on are for a blown boiler, electrics, damp and other hazardous things. It's still in  no fit state to be lived in because.....

3. It's absolutely full of old bits and bobs that they both hoarded over the years. It all has to be removed and as none of us live near it, it's a real problem to spend time with it. 

4. Lastly, there is a Fish and Chip shop attached to it which is up and running. The guy who runs it pays for Gas and Electric to the main house plus a few hundred quid per month. Something my Dad sorted out so nothing to do with us but the executor now holds his weekly payments. He has suggested buying the property but only in passing.

None of this is a major issue and I agree with everyone who says sell as is and that's what we kind of all agreed on. We just needed to make sure it wouldn't burn down while we weren't there. 

@RHemmings -  Many Thanks. I do want to reduce rent/staircase as this is our home now and we all love it here. But I guess it's reassuring to know that there are still Mortgage options available if push comes to shove.

@ThisIsWeird- Many thanks and yes, the initial Shared Ownership Scheme can be very helpful to first time buyers but it has also been known to literally trap people so one has to be very clear what they want from SO. I intended to stay long term here and staircase (buy extra shares) but due to the rather rapid growth of property prices, I just can't do that at the moment. It's good on the one hand because If I can sell this place AND take a share from my dad's old house, I have a good deposit. Just 20 years later than i'd hoped. So ideally. I'd like to stay.

I did want to really flip my Dad's house but as you say, the return would need to be very good and it really would take years and thousands to complete. None of us are in particularly high paying jobs. Were just working class people trying to get on but I think the general consensus was to get shot of it as soon as possible.

@Tucosalamanca - That really is good advice! Thank you, I really need to make sure everything is in order. It's these sorts of things that my Dad was very blase about and it's kind of rubbed off on me. My wife is not native English, so all of what is happening now is just leaving her feeling more helpless than me. 

I really do thank you all for your input. We have a new build plot close to us and some of the windows have "SOLD"in them and the houses are really quite nice. I think to myself, "Where the hell did I go wrong?" 

I've written a short but polite letter to the Housing Association so that they are aware of my worries and asked for more guidance. I don't think they'll really care as long as I continue to pay I think.  

Its obviously not the position I'd always hoped for. To threaten my families future security is totally devastating and I just want to curl up into a ball. But I thank all of you. I think you've given excellent advice and I actually feel a bit better. 

annetheman

Agree with the recommendation to sell the inherited property as-seen - don't spend another penny on it.

You could also consider selling your shared ownership home, and using the proceeds of both sales for a deposit on a wholly owned freehold home. Depending on where you live, you could find that with your deposit, and at your age a 20-year term is possible (I'd speak to a broker, though), so you could well have peace of mind in owning your own home instead of SO, which is in effect a more stable form of renting (Landlord won't serve a no fault eviction, is the only benefit).

If you speak to a broker about your finances, and you have a realistic view of what type of deposit you need and if you could afford a mortgage, I'd absolutely do that. You will also find you can borrow more on traditional mortgage than SO - I am currently selling my SO and buying a freehold house, and found that I can only staircase to 70% of a £365,000 SO flat, but I can buy a whole £365,000 house - less deposit. So there you go!

Yorkie1

sneakygloworm said:

Dear All, Thank you very much for replying! I very much appreciate it. Now for some clarity. I wrote the first post in a bit of a rush this morning so i'll add some detail that I apologise for missing initially.

My Dad's estate was left pretty much without a will and as he'd re-married the house was left to us four "kids". Me, my brother and our two stepsisters (one of which was made executor as her mum died a year after my Dad). Together, we will hopefully take a quarter share. But 3 or 4 things are causing problems.

1. My Dad and Stepmum owed Money. Not sure how much but the solicitor will not release the deeds until the debt is repaid. 
2. The house really is in a poor state and in it's current state would likely make 200K possibly. The repairs we have taken on are for a blown boiler, electrics, damp and other hazardous things. It's still in  no fit state to be lived in because.....

3. It's absolutely full of old bits and bobs that they both hoarded over the years. It all has to be removed and as none of us live near it, it's a real problem to spend time with it. 

4. Lastly, there is a Fish and Chip shop attached to it which is up and running. The guy who runs it pays for Gas and Electric to the main house plus a few hundred quid per month. Something my Dad sorted out so nothing to do with us but the executor now holds his weekly payments. He has suggested buying the property but only in passing.

None of this is a major issue and I agree with everyone who says sell as is and that's what we kind of all agreed on. We just needed to make sure it wouldn't burn down while we weren't there. 

...

As I suspect your solicitor has indicated, the debts of your Dad and your stepmother will need to be paid from the estate(s) before the estate(s) can be settled fully. If the non-house assets in the estate aren't enough to satisfy the debts, then the house will probably need to be sold. 

Costs of maintaining the house - have they come out of estate funds, or are you / your siblings paying for them? Has the solicitor advised upon this?

Is there a need for the items in the house to be checked before disposal? Either for sentimental value, actual value, or paperwork that's important? Or could the estate fund a house-clearance firm to simply come in and dispose of everything?

I agree with everyone else that getting the house sold sooner rather than later seems to be in everyone's interests. There is ongoing stress, expense (debts will probably be accruing interest, not to mention council tax, ongoing solicitors' fees, any empty property insurance etc,), and blockage to moving on with your lives until this is resolved.

The executor might want to have some informal conversations with the neighbour. This would also mean that the estate doesn't need to spend time and further delay in unpicking the fuel arrangements too!

NameUnavailable

The house sounds like a classic auction property. You could get it sold very quickly if you wanted to and could even sell as is and let the buyer have to dispose of the contents (assuming there's nothing valuable etc).

The fact that you immediately think you can't get a mortgage at 53 suggests that you haven't really though things through or had any proper advice as to your options. Maybe speak to a few people such as a mortgage broker, financial planner etc., find out exactly where you stand and then when you have your share of the house proceeds you can decide how best to use that.

[Deleted User]

Another victim of a shared ownership scam. I feel for you, OP, I really do. Those schemes were never designed to be anything but cash cows for the shared ownership companies.